Guinea threatens Rio Tinto with loss of mine

Rio Tinto is in dispute with the government of Guinea over rights to one of the most lucrative iron ore deposits in the world, the Simandou Prospect.

According to the FT, Rio Tinto’s claim to half of this deposit with be cancelled if the Anglo Australian miner is not ready to start shipping the iron ore by 2015. In this scenario it is likely that the Guinea government would then resell these rights to a competitor.

The venture requires the construction of a 670km railway to connect the iron ore deposits to the coast, but there is widespread speculation that the Guinea government, which is in receipt of a substantial aid package, is not in a position to raise the necessary finance to plug this infrastructure gap.

This nuclear option at the disposal of the Guinea government is something it has used before, when in 2008 the previous government cut Rio Tinto’s prospect by 50 per cent claiming deadlines were missed.

According to the FT: â€œThe stand-off marks a deterioration of relations in the two years since Rio paid the government $700m to settle previous disputes over the Simandou prospect.”